Obadoba Y.O. and Umar A.U.

Jurnal Mekanikal, June 2019, On-line First Article.

Sources of Risk in the Rice Production: A Case of Smallholder

Farmers and Producers of Soba Community in Northern Nigeria

Yunusa Onivehu Obadoba and Umar Ali Umar*

Department of Mechanical Engineering, Faculty of Engineering

Ahmadu Bello University
Zaria, Nigeria

ABSTRACT

Researchers have proposed different and varying methods in approaching risk factors and
identification, but none has comprehensively dealt with the issue of risk factors in rice
production. Most research on risk sources in rice production are treated on a broad level
without narrowing it down to the farmers level. Risk identification in rice production
should encompass all areas in the production as much as possible. In this study, based
on how the factors, both outward and inward influences the productivity of rice
production, the researchers aim at analysing the risk sources and perception in rice
production in Soba, Kaduna state, Nigeria. Well established questionnaires were used in
accumulating data from 342 farmers in the field. The sample number was derived using
Yamane formula for determining the sample size in a population study. The information
collected with questionnaires was examined making use of SPSS which entails the mean,
frequency table, percentages, charts and Kendall’s W-statistics. The results obtained from
the research showed that the highest risk source to rice production in Soba included
technological risks and also financial risks with a mean rank of 4.08 and 3.62, respectively.
The estimation of the W-statistics turned out to be 0.413, which implies that there is a
moderate agreement by rice producers, which is fairly acceptable. The estimated
pertentage loss as a result of the identified risks is 33.645% from the farmers side and
20.513% from the processing side.

Keywords: Risk assessment, risk factors, rice production, risk sources, science

1.0 INTRODUCTION

As the Nigerian population increases, human needs have also increased. The agricultural
sector is also affected because of its dependence on the elements of weather, climate,
technology and human variables. The African continent including Nigeria is largely
agrarian by nature. This leads to dependence on land for agricultural purpose [1]. According
to Price Waterhouse Coopers (PWC), rice farming in Nigeria has proven to be much
difficult to sustain in its production, not just to the nation as a whole but to the farmer
himself [2]. In 2017, rice production in Nigeria was peaked at 3.7 million tons, while its
consumption rate was estimated at 6.4 million tons [2]. From the report, Nigeria still needs
to import about 2.7 million tons in other to meet up with its rising demand. Researchers
have proposed different and varying methods in approaching risk factors and identification.

___________________________
*
Corresponding email: umaraliumar@yahoo.co.uk

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 Obadoba Y.O. and Umar A.U.
Jurnal Mekanikal, June 2019, On-line First Article.

Tychon et al. defined risk as a product of hazard and vulnerability [3]. This focus on
rice production generates a need for a refined awareness of risk and its management
practices, to ensure food security. To increase growth in the agricultural sector, the
government have accelerated establishment of easy access to agricultural loans to aid
farmers, as well as increase venture in irrigation systems to decrease reliance of rainfed
agricultural systems in rice production. In association with foreign agricultural
stakeholders, ensure that there is awareness to the local farmers about farming with Good
Agricultural Practices (GAP) [4]. Despite all these determinations, the agricultural sector
is classified with a firm vulnerability to risk such as: Price is likely to rise due to agronomic
trade liberalization and production needs is expected to rise due to rising quality necessities
for some products and firmer rules as regards the use of inputs [5]. Climate change also has
an impact on production risk as well, among other things.
Rice production in Nigeria is confronted with several risks arising from financing,
production, marketing, and inconsistent policies. It is necessary to understand the risk
involved in rice production to ensure adequate management for food security in Nigeria.
Unfortunately, agricultural production in Nigeria is integrally risky, which at the end puts
farmers into excessive loss due to flooding in many parts of the country [6]. Additto et al., ,
study the major sources of risk in the northern and eastern part of Thailand he identified
unexpected variability of product prices as the major risk factor [7]. This factor is classified
under market pricing risk. Nto et al. study risk management practices in rice production in
Abia state of Southern Nigeria, and identify social risks and political risks as the two most
important source of risks [5]. Research trend shows that that dominant sources of risk vary
by location. However, none has comprehensively dealt with the issue of risk factors in rice
production in Northern Nigeria. This paper aims to identify the sources of risk in rice
production in Soba community and its influence on rice farmers and producers

2.0 LITERATURE REVIEW

2.1 Risk Sources in Rice Production

Risk sources comprise of all the factors and variability that produces a risk. In line with [8],
there are five main roots of agricultural risk namely; production, marketing, financial, legal
and social risks. Production risk is any occurrence or activity connected to manufacturing
which comprises of various possible results. Marketing risks are market activities or
occurrences that result in inconsistency of costs that farmers obtain in return for his or her
products and services or purchase production inputs. Whereas financial risk covers all those
risks that loom over the financial situation of a business. This contains the price and
accessibility of capital, the flexibility to satisfy income needs in a very timely manner, it
also contains the ability to keep up and grow equity and also, the ability to soak up short-
term financial shocks [8].
Furthermore, Laurence et al. explained that the regular activities of most producer
involve obligations that have legal implications [8]. Risk arising from these activities
constitute a legal risk and having a good understanding of those risk and the way it affects
producer businesses will result in better risk management decisions.
Finally, human risk arises from the point of view that individuals are inevitably the root
of all business risks, also as an important part of the strategy in dealing with the risks.
Human or social risk management is the ability to make sure that everyone who takes part
in the business is kept safe, satisfied, happy and quite creative [8]. Based on literature
review, there are different sources of risk in rice production, some of which embody the
technology risk, political risk, economic risks, production risk, marketing risk, human or
personal risk, and financial risk.

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Jurnal Mekanikal, June 2019, On-line First Article.

2.2 Macroeconomic Source and Policies Inconsistency

This could be referred to as ‘political risk’ and a few of its identifiers are when the
government policies are not duly carried out like the increased price of foreign rice; not
using the subsidized value to be given to producers; inflation of the price of inputs
equipment by third parties. Inconsistency in plans makes forecasting unfeasible and
difficult in rice production.
One of the key problems in rice production in the African nation is that most of the
information for rice production is largely based on those that are being recirculated from
the Agricultural Development Projects (ADPs) instead of a formal in-depth study.
Therefore, a detailed report or illustration of the rice production system in nations across
Africa is quite a difficult thing to come by. Also, the news out there at the ADPs rely on
productions done quite at a large scale. Notwithstanding, there is a high number of low
scale producers than large scale producers in Nigeria. The smallholder farmers are deserted
on their own to make sure the sub-sector remains afloat against such a large amount of
odds.
Many hindrances within the rice industry make up the industry's inadequacy to
successfully attain sufficiency by itself in rice production. These problems must be
addressed in other to cut back over-reliance in imports and to bridge the gap in terms of
production and consumption. To ensure that the conditions necessary for meeting the
production of rice is available, conscientious efforts by agricultural stakeholders,
governmental focus and sound agricultural policies are very important.
The government inconsistent policies on the importation of rice, government officers
ill-attitude towards farmers in the distribution/sale of fertilizers and other inputs have been
found to be contradictory (including improved seed). Any intervention or investment
designed around government policies might not be held for a long period as a result. The
investors could succeed in influencing policies, however, the question is how long can the
policies hold out before there is a need for change or it is neglected? [9].

2.3 Production Risk

Agricultural production suggests a presumed output or yield. Variability or changes in a
number of the outcomes presents risks to the ability of the producer achieving its monetary
goals. Production activities or event that feature various outcomes that could be attained is
a production risk. The main risk sources of production are environmental condition
changes, pests and diseases, technology, genetics, machine efficiency, and also the quality
of inputs. Fire, wind, and theft together with other casualties are also risk sources in rice
production [8].
Production risks also include unavailability of labour because of the unavailability of
skilled workers within the production surroundings. Other parts of this risk are lack of
improved varieties, obsolete, and inefficient technology; drought, flooding, poor soil
fertility, decayed infrastructure, pest and diseases as well as land tenure [9, 10].

2.4 Marketing Risk

According to Laurence et al., marketing in agricultural production is the part of the
agribusiness that transforms the activities of production into a financial success [8]. In
agriculture, many unanticipated factors can affect the marketing price of agricultural
products. Some of those factors may include weather or governmental actions, this can lead
to dramatic changes price of input and outputs. A producer or marketer could take
advantage of the variability in market prices by understanding and forecasting anticipated
turn in events.
Marketing risk is any activity or occurrences related to market which steers us to
differences in the prices farmers collect in exchange for their goods or pay for production
inputs. Difficulty in accessing markets is also a marketing risk [8]. This risk is also related
to high input cost and low output cost, which is due to incorrect care after harvest especially

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Jurnal Mekanikal, June 2019, On-line First Article.

in areas of polishing and packaging [11].

2.5 Social Risk

People managing risk may also be the one to have created it. Being able to make sure that
everyone connected to the business remains safe, happy and creative is termed the
management of human risk.

2.6 Financial Risk

Laurence et al. defines financial risk as the risks that loom over the financial status of a
business [8]. There are four basic components; the cost and availability of capital, the
capability to meet cash flow needs in time, the talent to maintain and grow equity, and the
ability to take in short-term financial shocks. Cash flows are particularly necessary as a
result of the various obligation still taking place like cash input prices and lease payments,
tax payments, debt compensation, and family living expenses.
Nto et al. noted that interest rate and non-accessibility of credit to rice producers are
part of the major reasons of financial risk in the production of rice [5]. Rice farmers usually
loan cash from informal sources with a very high-interest rate. Formal credit establishments
are extremely forced in funding rice production as a result of inherent risk and limitations
related to the enterprise [12].
In a study conducted by Boggess et al. on the awareness of risk in crop production, rice
manufacturers were asked to list out the impending risks and then to rate the risk sources
depending on how important and drastic each risk was to their farms [11]. The results of
the research carried out showed that many of the respondents listed out risk as the reason
for a negative outcome. The respondents graded rainfall variability, pests and diseases, and
changes in crop prices as the main source of risk for crop production [11].
Usman et al. studied the sources of risk and management strategies among farmers in
rice post harvest management in Niger state [13]. The research showed that farmers in the
study area were affected by the production risk, financial risk, human or personal risk,
market or price risk and technological risk sources

2.7 Risk Perception in Agriculture

The evaluation of farmer’s notions and also the way they respond to risks and approach
risks are important because this could explain the attitude of rice manufacturers towards
making decisions when they come across risky situations [14]. The low amount of vital
information on the views of farmers’ towards risk and their attitude when they come face
to face with risk present a tough work for policymakers and researchers who would like to
see and take part in improving the risk management system to help farmers [14]. Existing
studies show that there is no agreement concerning what the right and best methods to
explain the sources of risk and response of farmers to risks on their farms. However, the
Likert-scale rating technique has been often applied in previous research. In most of these
studies, the respondents were asked to rank the sources of that plagued their farm and also
collectively, the ways they managed the risks on a scale of 5 points (where a measurement
of 1 is not really important and 5 is extremely important) [7].

3.0 METHODOLOGY

The sample size is calculated using the Yamane formula of determining the population
study. Based on the information obtained from the Kaduna Agricultural Development
Agency (KADP), there are about 3000 rice farmers in Soba Local Government of Kaduna
state and about 100 local rice millers.
Yamane formulation was used for determining the population size: